Managing With Measures

Volume 138, No. 17, Friday, October 18, 2013

Managing a cheese manufacturing company is a challenging job. At the organization level, the right strategic direction must be developed. This step is vital to focus the company’s direction in an extremely competitive business environment.

Then we must assure that our operations are efficient and capable of meeting our needs. There are many processes to manage, and they are often complex.

Finally, our success depends on the job performance of our employees. We need to cultivate their knowledge and support their development as our process experts. The Organization, Operation and Job Performance levels all need to work together to optimize our results. At each level, we are able to improve our results by managing with measures.

An old business adage states “You can’t manage what you don’t measure.” Measurement has power. The psychology of measurement is almost magical. Performance results will often improve simply by introducing a measurement.

Think about how important measures are in your everyday life. For example, how many speeding tickets do you avoid by watching your car’s speedometer to stay within limits? Everyone has the built-in ability to work with measures. You can use this ability to improve your cheese business.

To define and measure their success, businesses use Key Performance Indicators (KPIs). KPIs need to be quantifiable and focus on critical activities.

The nature of KPIs changes depending on the business level. It is important for the measures used at all levels to be aligned with one another. Measures used on the plant floor need to support operational goals.
Likewise, the operational level KPIs we established reinforce the organizations strategic direction. Aligning measures at all levels helps management assure that everyone is working toward what is important to the company.

You depend on measures to manage your cheese business. Measures provide a basis for performance accountability and support improvement efforts.

At the Organization level, cheese company executives can use standard financial KPIs to track their overall success. Some examples include Total Production, Sales Volume Growth and Profit Margin.

The KPIs take on an industry-specific flavor at the Operation level. Here we see measures like Cheese Yield, Butterfat Retention in Cheese, Good Cheese % and Cheese Pounds/Hour.

Let’s look at how a cheese company can align measures at the three levels. Profitability is likely to be one of the top KPIs for the cheese company at the Organization level.

Let’s say that the company has a strategic objective to increase its profit margin, measured as a percentage of sales. One strategy is to improve cheese yields. This strategy is assigned to the Plant Manager at the Operation level.

The Plant Manager sees KPI cheese yield results every month, reported as cheese per 100 pounds of milk. He or she establishes an operational goal target of improving the actual yield compared to the same month from the previous year. One action plan assigned to the Cheese Supervisor is to increase the percentage of available butterfat that ends up in cheese.

The supervisor sees a monthly report that includes the KPI Butterfat Retention in Cheese. This is a measure of the total butterfat in cheese divided by the total butterfat in the milk.

The action plan target is to improve the monthly butterfat recovery results compared to last year. The supervisor works with the cheese makers to increase butterfat recovery by optimizing the vat set, cut and cook procedures. Pre-Draw Whey Butterfat % is the KPI used to monitor the results for each vat.

In our example, the four KPIs align with each other. Improving the Pre-Draw Whey Butterfat % increases Butterfat Retention in Cheese. This in turn improves Cheese Yield which increases the Profit Margin.
Management is providing a clear picture of what is important along with measures and expectations. This is the basis of providing performance accountability.

To keep people engaged, the KPIs need to become a major focus of their jobs. We post the KPIs and targets where everyone has access. Daily, weekly or monthly updates show everyone the progress we are making toward the targets. Supervisor discussions reinforce the focus on performing to reach KPI targets.
We have created a motivating link between employee accountability and performance evaluation.

One more very important aspect of measurement relates to our improvement efforts. In cheese operations, we typically want to increase yield, improve quality and reduce cost. Identifying and defining measures of success is a basic step in continuous improvement models.

KPIs already in place provide excellent input to the improvement team. In some cases, new measures need to be developed that are specific to the project. These new measures often remain in place after the project ends to help sustain improvements.

You depend on measures to manage your cheese business. Measures are used to define and track success. They help align all business levels to work toward strategic objectives. Measures provide a basis for performance accountability and support improvement efforts.
Now is the time to plan for the future. Use the power of measurement to impact your success.

Kelton Greenway, a longtime cheese plant owner and manager, is president of Vital Focus Consulting. He can be reached at (608) 770-1293; e-mail kelton.greenway@gmail.com.

Other Kelton Greenway Columns

Managing With Measures is Kelton Greenway's first column

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